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What's Driving Financial Services? Think Big Data

Plenty of companies are still eyeing big data curiously, but not financial services firms. A whopping 71 percent of the industry is already using big data and analytics, up from 36 percent just two years ago, according to a survey by the University of Oxford and IBM’s Institute of Business Value.

The reason is simple. Big data delivers a desperately needed competitive advantage to an industry still struggling, after the worldwide financial crises, to return to profit margins of old.

Cost reductions and traditional business models alone can’t do the job. So banks and financial services firms are turning to big data, using insights pulled out of daily transactions, market feeds, customer service records, location data, and click streams to carve out new business models and services and transform how they go to market.

Still, figuring out how to make the most of big data is a challenge. Our survey revealed four main areas that financial services firms need to tackle:

Customer analytics drives big data projects: Some 55 percent of the financial industry respondents surveyed pinpointed customer-centric projects as their top priority. Customers, not products, are the focus of industry leaders now.

Which is why customer data has to become the organizing principle around which operations, technology and systems revolve. Using big data — not focus groups or intuition — to better anticipate changing markets conditions and customer preferences will enable companies to deliver the kinds of personalized services that can create new markets and improve customer loyalty.

For example, ANZ Banking Group is rolling out a digital assistant that regional bank managers will use to sift through every bit of information they have about a client, their own services, and updated market trends to make smarter, faster and more personalized recommendations for their two million wealth management clients.

Big data means big integration: Companies simply can’t make the most of big data without putting in place or integrating together systems that can handle the growing volume, variety and velocity of data and share it throughout the organization.

Yet, only 53 percent of the banking and financial markets companies surveyed have integrated information systems. Which makes integration a clear way to jump ahead of the competition.

Internal data is a goldmine: More than half of the financial services firms surveyed said internal data is the primary source of big data they’re mining in their new projects, underscoring the massive untapped data mine locked away in these internal systems. Some 92 percent are sifting through transaction data and 81 percent are parsing their log data, or information that’s often been logged but never analyzed.

The survey, though, also reveals that the financial industry is lagging others in making the most of other data it could use to create a real competitive advantage. For instance, only 21 percent of firms are analyzing audio data, such as that created in call centers, and only 27 percent are analyzing social data.

Strong analytics is big data’s linchpin: Big data amounts to nothing without strong analytics tools — and the skills to make the most of them.

Yet, the financial services industry lags other industries in the kind of analytics capabilities — social media, streaming, video, and voice analytics — that are crucial in handling the unstructured data that makes up so much of big data. For instance, only 18 percent can analyze texts such as written customer service reports. This is a real problem, since the analytics hardware and software is maturing, but the skills needed to use them are in short supply.

There’s almost no industry better poised to profit from big data — or in need of a boost — than the financial services industry. By understanding where the gaps are, they can set the pace for the rest of the economy.

Likhit Wagle is a Partner and the Global Banking and Financial Markets Leader in IBM Global Business Services. Previously, he led IBM’s Banking and Financial Markets team in North East Europe and has more than 15 years experience in counseling corporate financial services clients.

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